Canadian satellite operator Telesat Holdings
Inc. has been such a strong performer since BCE Inc. sold the business in
2007, its current shareholders can't agree on how to cash in.

On one side is the Public Sector Pension Plan Investment Board, a
Montreal-based fund that manages retirement money for federal employees,
including the RCMP. It wants to sell its 36-per-cent stake, or at least part of
it, after making what sources said is a huge profit on its investment.

The Caisse de depot et placement du Quebec (CDP) in Montreal on July 21, 2010
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On the other side is New York-based investor Mark Rachesky, who controls the
company that owns the other 64 per cent of Telesat
- and who doesn't want to sell.

The result of the conflict: PSP Investments is now forcing its partner into
an initial public offering of Telesat, the
satellite company that supports the TV services of BCE and Shaw Communications
Inc., and facilitates communications in Canada's Far North. Observers say the
business is worth as much as $6-billion; if the IPO goes ahead and the company
is listed on the Toronto Stock Exchange, it would rank as one of the largest 100
public companies in Canada.

Regulatory filings and interviews with sources reveal that even behind the
most successful deal, shareholder differences can fester. PSP two months ago
informed its partner on the deal, Loral Space & Communications, that
it was exercising its right under their shareholders' agreement to require Telesat to go public.

Loral is a publicly-traded U.S. holding company, but it is also essentially a
vehicle of New York hedge fund MHR Fund Management LLC, which was founded in
1996 by Mr. Rachesky, a former managing director for billionaire activist
investor Carl Icahn. MHR owns most of Loral's equity; Mr. Rachesky is chairman
of both Loral and Telesat.

Loral spokeswoman Wendy Lewis said in an e-mail that Loral is "supportive of
PSP's request for an IPO but there are a number of things to be worked out
before it can happen" including the revision of a shareholders' agreement.
Meanwhile, Loral chief executive officer Michael Targoff said last month his
company had no intention of selling any shares in an IPO.

The move by PSP was no less than the third attempt to cash in on the
investment in the world's fourth-largest satellite services operator since 2010.
"There's a huge tension between the shareholders," said one source familiar with
the situation. Both PSP and Telesat declined to
comment.

In many ways, the rift is an unintended consequence of Telesat's solid performance since the partners teamed up
to buy the Ottawa-based firm for $3.25-billion in 2007. Telesat, under CEO Daniel Goldberg, has increased
revenues and profitability through a string of successful satellite launches and
tight cost controls. The company, which earned $237-million in profit on
$808-million in revenue last year, has a fleet of 13 satellites.

Neither investor was expected to hang on to Telesat for the long haul, but each has a different set
of circumstances that weigh on their longer-term intentions. The chief
difference between the two is the tax implication of a change in ownership.
While PSP is exempt from paying income tax, Loral has been careful to ensure any
deal minimizes its tax bill.

That has been tricky because Telesat has been
such a successful investment for Loral. Sources familiar with the situation say
Telesat's 2010-11 strategic review brought matters
to a head. A sale process brought out several interested bidders and PSP
Investments was happy with the prices. But Loral was concerned a sale would
leave it with a huge tax hit.

"The two couldn't agree on anything," one source said.

So instead, the two parties agreed to recapitalize Telesat, increasing its debt burden by close to
$500-million and paying themselves $705-million in dividends. Loral's share of
the proceeds, $420-million, enabled it to recover all of its original investment
- without triggering a tax hit.

Also contributing to tensions was the fact Loral was limited to 33-per-cent
voting control in the original deal to stay onside with foreign ownership rules.
The federal government dropped the rule in 2010, but Loral was bound by its
original deal to its minority voting position.

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